SMITH, Circuit Judge.
This case concerns the applicable burdens of proof for establishing jurisdiction in a removal action under the Class Action Fairness Act of 2005 ("CAFA"), 28 U.S.C. §§ 1332(d), 1453. Defendant in this action, Travelers Property Casualty Co. of America ("Travelers"), removed the case to the United States District Court for the Eastern District of Pennsylvania. Plaintiff Francine Judon ("Judon") timely sought remand. The District Court found CAFA's numerosity and amount-in-controversy requirements to be in dispute and placed the burden of proof on Travelers to establish jurisdiction under CAFA by a preponderance of the evidence. Concluding that Travelers failed to meet its burden, the District Court issued an order remanding the case to state court. Travelers appealed.
As Judon's complaint unambiguously pleaded that the numerosity requirement was satisfied, the District Court should have placed the burden of proof on Judon to show, to a legal certainty, that the numerosity requirement was not satisfied. But the District Court correctly applied the preponderance of the evidence standard to the amount-in-controversy requirement. Accordingly, we will affirm in part, vacate in part, and remand to the District Court for further proceedings.
On December 12, 2010, Judon was injured while riding in a passenger vehicle capable of transporting fewer than 16 passengers owned by Keystone Quality Transport Company and insured by Travelers. After the accident, Judon sought first-party medical benefits under the Travelers insurance policy of $7,636.40. Travelers paid Judon $5,000, up to the first-party medical benefits limit in the policy, but declined to pay Judon $2,636.40 for her claims over the policy limit.
On January 24, 2014, Judon filed a class-action complaint in the Court of Common Pleas of Philadelphia County. The primary basis of Judon's complaint was that Pennsylvania law required that the Travelers policy held by Keystone offer up to $25,000 in first-party medical benefits. Judon's complaint alleged two counts: (1) that Travelers' refusal to pay first-party medical benefits beyond $5,000 constituted breach of contract; and (2) that Travelers' denial of Judon's and other putative class members' claims was done in bad faith and in violation of 42 Pa.C.S.A. § 8371. Judon also asserted a claim on behalf of the following class members:
Judon further alleged that "there are hundreds of members of the class" who were "wrongfully and illegally denied payment" of first-party benefits by Travelers.
Judon sought a court order requiring Travelers to "make payment of first-party medical expense benefits in an amount up to $25,000" to Judon and class members in connection with injuries sustained in motor vehicle accidents that were covered by Travelers' policies of insurance. Further,
On February 28, 2014, Travelers timely filed a notice of removal under CAFA. Travelers argued that the proposed class met the three requirements for CAFA removal under 28 U.S.C. § 1332(d). Travelers asserted, and Judon did not contest, that the parties were minimally diverse. Travelers also contended that Judon's reference to "hundreds of members" must mean at least 200, such that the proposed class consisted of at least 100 putative class members pursuant to § 1332(d)(5). Travelers also argued that the amount in controversy exceeded $5,000,000 pursuant to § 1332(d)(2). In order to reach that figure, Travelers asserted that the value of each putative class member's damages could amount to $20,000 (consisting of $25,000 in allegedly required first-party medical benefits minus the $5,000 in first-party medical benefits actually paid). The minimum total number of class members, 200, multiplied by the total amount each class member could be entitled to, $20,000, would yield $4,000,000 in potential compensatory damages. Trebling this amount as demanded by Judon, Travelers contended, yields an amount in controversy exceeding $5,000,000.
On March 7, 2014, Travelers filed a motion to dismiss Judon's class-action complaint arguing, inter alia, that Travelers' denial of Judon's medical expenses was proper under applicable Pennsylvania law. In the alternative, Travelers argued that it had an objectively reasonable basis for refusing to make payment of Judon's medical expenses and, as a result, punitive damages were not warranted.
On March 24, 2014, Judon timely filed a motion to remand, contending that as the removing party, Travelers bore the burden of establishing jurisdiction under CAFA. According to Judon, Travelers did not meet that burden because it failed to show to a legal certainty both that: (i) the amount in controversy exceeded the statutory minimum of $5,000,000; and (ii) there were more than 100 class members. In order to do so, Judon argued, Travelers must submit proof regarding the actual number of class members and the actual amount of those putative class members' damages. Judon also argued that the potential for punitive or treble damages could not count towards the $5,000,000 amount-in-controversy requirement both because such potential damages would need to be actually translated into monetary sums for each putative class member and because Travelers had challenged the availability of punitive damages in its motion to dismiss.
The District Court granted Judon's motion to remand on June 30, 2014. The District Court reasoned that because Judon "vigorously contest[ed]" the facts Travelers relied on to establish jurisdiction, the "preponderance of the evidence standard [was] appropriate for resolving the dispute." Because the District Court reasoned that Travelers was required to "put forward proof to a reasonable probability" that jurisdiction existed under 28 U.S.C. § 1332(d), and because Travelers provided no such extrinsic evidence, the District Court remanded the case to the Court of Common Pleas of Philadelphia County. Travelers timely petitioned for review of the remand order pursuant to 28 U.S.C. § 1453(c)(1). On October 3, 2014, we granted Travelers' petition.
The District Court exercised jurisdiction pursuant to 28 U.S.C. § 1332(d). We exercise jurisdiction pursuant to 28 U.S.C. § 1453(c). A party asserting federal jurisdiction in a removal case bears the burden of showing "that the case is properly before the federal court." Frederico v. Home Depot, 507 F.3d 188, 193 (3d Cir.2007); see also Morgan v. Gay, 471 F.3d 469, 473 (3d Cir.2006). Our review of issues of subject matter jurisdiction is de novo. Kaufman v. Allstate N.J. Ins. Co., 561 F.3d 144, 151 (3d Cir.2009).
At the core of this jurisdictional challenge is the nature of the burden of proof and evidentiary standards applicable in a case removed under CAFA. CAFA confers on district courts "original jurisdiction of any civil action" in which three requirements are met: (1) an amount in controversy that exceeds $5,000,000, as aggregated across all individual claims; (2) minimally diverse parties; and (3) that the class consist of at least 100 or more members ("numerosity requirement"). 28 U.S.C. § 1332(d)(2), (5)(B), (6); Standard Fire Ins. Co. v. Knowles, ___ U.S. ___, 133 S.Ct. 1345, 1347, 185 L.Ed.2d 439 (2013).
In order to determine whether the CAFA jurisdictional requirements are satisfied, a court evaluates allegations in the complaint and a defendant's notice of removal. Frederico, 507 F.3d at 197; Morgan, 471 F.3d at 474.
We begin by demarcating the various jurisdictional tests applicable in a CAFA removal action. In Samuel-Bassett v. Kia Motors America, Inc., we closely analyzed the burden of proof for establishing the amount-in-controversy requirement under 28 U.S.C. § 1441 — the general removal statute. 357 F.3d 392, 396 (3d Cir.2004). This pre-CAFA decision reconciled two Supreme Court cases that established distinct burdens of proof to be applied depending on the nature of a party's jurisdictional challenge. Id. at 397-98 (reconciling St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 58 S.Ct. 586, 82 L.Ed. 845 (1938) with McNutt v. Gen. Motors
In McNutt v. General Motors Acceptance Corp. of Indiana, "a challenge to the amount in controversy had been raised in the pleadings [specifically the answer]," but "no evidence or findings in the trial court addressed that issue." Samuel-Bassett, 357 F.3d at 397; McNutt, 298 U.S. at 179-80, 56 S.Ct. 780. The Supreme Court held that "the party alleging jurisdiction [must] justify his allegations by a preponderance of the evidence." McNutt, 298 U.S. at 189, 56 S.Ct. 780. Accordingly, if the jurisdictional facts are challenged "in any appropriate manner," the party alleging jurisdiction "must support them by competent proof." Id. Because the jurisdictional amount was in dispute and there were no adequate findings as to that issue of fact, the Supreme Court held that the district court lacked jurisdiction and the case should be dismissed for want of jurisdiction. Id. at 190, 56 S.Ct. 780.
By contrast, in St. Paul Mercury Indemnity Co. v. Red Cab Co., after the defendant removed the case to federal court, the plaintiff amended the complaint to allege damages less than the amount necessary to create jurisdiction. 303 U.S. at 285, 58 S.Ct. 586. Thereafter, the district court conducted a bench trial and made factual findings, stated its conclusions, and entered judgment for the plaintiff. Id. The defendants appealed. Id. The Seventh Circuit "refused to decide the merits on the ground that[,] as the record showed[,] respondent's claim did not equal the amount necessary to give the District Court jurisdiction." Id.
The Supreme Court held that the relevant test to establish jurisdiction was whether "from the face of the pleadings, it is apparent, to a legal certainty, that the plaintiff cannot recover the amount claimed or if, from the proofs, the court is satisfied to a like certainty that the plaintiff never was entitled to recover that amount." Id. at 289, 58 S.Ct. 586. This rule from Red Cab "`does not require the removing defendant to prove to a legal certainty the plaintiff can recover [the amount in controversy] — a substantially different standard.'" Frederico, 507 F.3d at 195 (quoting Valley v. State Farm Fire and Cas. Co., 504 F.Supp.2d 1, 3-4 (E.D.Pa.2006)). Instead, under the legal certainty test, "the challenger to subject matter jurisdiction [must] prove, to a legal certainty, that the amount in controversy could not exceed the statutory threshold." Id. at 195.
After distinguishing these cases, the Samuel-Bassett panel analyzed an amount in controversy that was not based on specific damages alleged in the complaint but, instead, on an ad damnum clause
Travelers erroneously contends that such a dispute is created only where the challenging party puts forth admissible evidence.
257 U.S. 92, 97-98, 42 S.Ct. 35, 66 L.Ed. 144 (1921) (emphasis added) (citations omitted). In distilling these cases, we make clear that a jurisdictional challenge, which creates a dispute of fact, can be raised in the pleadings (such as the answer) or on a motion for remand. Cf. Kaufman, 561 F.3d at 151 (explaining that there was no fact in dispute regarding CAFA jurisdiction where the plaintiffs did "not dispute that the amount in controversy exceed[ed] $5,000,000").
Frederico v. Home Depot provides an example of undisputed facts in a CAFA removal action. In that case, the defendant relied on the facts alleged in the plaintiff's complaint to establish the amount in controversy.
Therefore, we applied Red Cab's legal certainty test to the facts alleged by the plaintiff in her complaint and incorporated by the defendant in its notice of removal. Id. We found that the plaintiff's compensatory and punitive damages totaled $1,722.84, and that the applicable attorney's fees, using the Federal Judicial Center's median percentage recovery, could amount to $516.85, bringing the plaintiff's "total damages to $2,239.69." Id. at 199. The plaintiff had alleged that there were "tens of hundreds of thousands" of class members. Using these two figures, we divided $5,000,000 by $2,239.69 that produced "a requisite class size of 2,233," which was well within the plaintiff's allegations regarding the number of class members. Id. This analysis left us satisfied that the Red Cab legal certainty test was met. Id.
Thus where there are contested facts related to jurisdiction the preponderance of the evidence standard from McNutt applies, unless a district court has previously evaluated evidence and made factual findings. Samuel-Bassett, 357 F.3d at 398. "Once findings of fact have been made, the court may determine whether Red Cab's `legal certainty' test for jurisdiction has been met." Id. at 398; see also Frederico, 507 F.3d at 194.
Thus, our jurisprudence establishes at least two distinct tests potentially relevant here with regard to removal jurisdiction in a CAFA case, whose application is dependent on the nature of the challenge and the pertinent facts of the case.
1. The McNutt/Samuel-Bassett framework applies where a challenge to the amount in controversy had been raised in the pleadings or the notice of removal, but "no evidence or findings in the trial court addressed that issue." Samuel-Bassett, 357 F.3d at 397; McNutt, 298 U.S. at 179-80, 56 S.Ct. 780. We require "the party alleging jurisdiction [to] justify his allegations by a preponderance of the evidence." McNutt, 298 U.S. at 189, 56 S.Ct. 780.
CAFA jurisdiction is limited to cases where the proposed class has more than 100 members. 28 U.S.C. § 1332(d)(5)(B). The District Court applied the Samuel-Bassett preponderance of the evidence test to Travelers' CAFA numerosity allegations in its notice of removal. The District Court applied the wrong test because it improperly held that Judon "vigorously contest[ed]" all jurisdictional aspects of removal, when, in fact, Judon never claimed that the proposed class action involved less than 100 members.
Travelers relied on Judon's complaint in asserting that there were at least 200 members of the proposed class. Specifically, Judon alleged in paragraph 38 of her complaint: "It is believed, and therefore averred, that there are hundreds of members of the class where the defendant, Travelers, wrongfully and illegally denied payment of first party medical benefits." Judon's sole challenge to Travelers' assertion that there were at least 200 putative class members was that Travelers supplied "no basis for this [number] other than the allegation in the complaint." Judon reasoned that "[s]ince Defendant has exclusive possession of the information necessary to determine the number of class members, Defendant's omission of any proof on this speaks volumes." There are two noteworthy aspects of Judon's challenge: (1) Judon did not disavow her earlier allegation that there were "hundreds of members;"
Because Judon explicitly asserted in her complaint that there are "hundreds of members," Travelers was entitled to rely on this fact as an admission in favor of jurisdiction. Parilla, 368 F.3d at 275 (addressing facts in a complaint that were judicial admissions); see also Glick v. White Motor Co., 458 F.2d 1287, 1291 (3d Cir.1972) (explaining judicial admissions are also binding in a case on appeal). And in alleging the number 200 in its notice of removal, Travelers simply relied on the smallest number of potential class members consistent with Judon's allegations. A plaintiff is the master of her own complaint, Morgan, 471 F.3d at 474, and here Judon pleaded information supporting the numerosity jurisdictional requirement.
Judon's supposed challenge obscured the question of whether there was a dispute of fact by improperly asserting that Travelers bore the burden of proof as to numerosity. But Judon's motion to remand
Accordingly, the District Court erred in failing to place the burden on Judon to prove to a legal certainty that there could not be 200 class members. See id. at 195. As Judon did not even dispute the "at least 200 members" representation, much less attempt to put forth any evidence to the contrary, the District Court should have found the numerosity requirement satisfied.
CAFA mandates that the "claims of the individual class members shall be aggregated" in order to determine if the "matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs." 28 U.S.C. § 1332(d)(2), (d)(6). The District Court reasoned that Judon also "vigorously contested" this jurisdictional element and placed the burden on Travelers to establish the amount-in-controversy requirement by a preponderance of the evidence. Because Travelers' notice of removal and accompanying memorandum are based on an inconclusive assumption that Judon challenged in her motion to remand, the District Court properly applied the preponderance of the evidence standard.
As a starting point, Judon did put the amount-in-controversy requirement in dispute. Judon's complaint was indeterminate regarding the amount in controversy. The individual damages claimed by Judon amounted to $2,636.40. The proposed class included individuals entitled to "first party medical expense benefits [and that] were not made available in an amount up to $25,000.00 but only in an amount up to $5,000.00." The complaint did not explicitly allege the total class damages, or the damages suffered by individual class members. Thus, Judon's allegations "[threw] no light upon [the] subject" of the total amount in controversy. See McNutt, 298 U.S. at 181, 56 S.Ct. 780.
Travelers erroneously contends that the jurisdictional amount is not in dispute because its statement of the amount in controversy in its notice of removal is based on facts pled by Judon in the class-action complaint. In so arguing, Travelers stretches the phrase "up to $25,000" to mean that each putative class member has a claim for $20,000 ($25,000 minus the $5,000 policy limit). In her motion to remand, Judon contended that Travelers provided "no information about the actual stated limits of the policies covering the class members, which could be more than $5,000, nor any information about the actual claims of the class members, which may or may not reach the statutory limit of $25,000." For example, Judon highlighted that her damages were "only $2636 as of the date of filing." Judon's motion to remand effectively put at issue and challenged Travelers' assumption regarding putative class members' individual damages.
Because a "challenge to the amount in controversy [was] raised" in Judon's motion to remand, but "no evidence or findings in the trial court addressed"
Travelers' estimate of the putative class members' compensatory damages relies on Travelers' maximum exposure per plaintiff in the amount of $20,000. Judon argues that a putative class member's claim could be much smaller — in fact, Judon's individual claim against Travelers is only $2,636.40. In a class action, the class representative's claim(s) must be typical of the claims of the class. Pa. R. Civ. P. 1702(3) (Pennsylvania class action typicality requirement); Fed.R.Civ.P. 23(a)(3) (federal class action typicality requirement). It is, therefore, not unreasonable to assume that Judon, as the proposed class representative, has damages that are typical of the class. See Frederico, 507 F.3d at 197 (accepting the defendant's contentions in its notice of removal that the plaintiff's damages reflected the "average actual damages of each member of the putative class"). Even if we were to assume that Judon's individual compensatory damages are on the low-end as compared to other putative class members, we are left with no evidence of what a reasonable claim against Travelers might be.
Rather than present evidence or rely on an admitted fact from Judon's complaint, Travelers admits that it is drawing inferences from the limited papers the parties have submitted. In its brief and at oral argument, Travelers attempted to bolster its assumption regarding damages by providing another calculation that would be sufficient to satisfy the amount-in-controversy requirement. Rather than assume maximum recovery of $20,000 per class member (as it did in the notice of removal and subsequent briefing), Travelers argued that even if each class member recovered "as little as $8,500 (roughly 42% of the potential maximum)," CAFA's jurisdictional threshold would be met. Travelers did not provide a principled reason to choose $8,500 as the appropriate delta for damages, as opposed to $2636.40 or even $20,000. The only explanation for Travelers' two proposed damages calculations that we can divine is that both $8,500 and $20,000 satisfy the requisite amount-in-controversy requirement.
Yet an assumption must be grounded on some reasonable inference that can be drawn from fact. Travelers chose — wishfully — the amount of $20,000 per putative class member, providing the putative class with total compensatory damages of $4,000,000 (200 class members multiplied by $20,000) combined with punitive and treble damages. These assumptions plainly make reaching the $5,000,000 threshold
As a result, Travelers' conjecture is nothing more than an optimistic estimate of its potential liability — at least for jurisdictional purposes.
Although Travelers was loath to concede at oral argument the legal arguments we now reject, we are left with the question of whether to remand to the District Court for it to determine if jurisdictional discovery should be permitted. Travelers contends that before filing its notice of removal, it searched for relevant jurisdictional facts but was apparently unable to complete its inquiry in time to include such facts in its notice of removal. Once in federal court, however, Travelers abandoned its alleged previous attempt to put forth any actual facts. Instead, Travelers relied solely on the proposition that the legal certainty test should apply to all jurisdictional questions in this case.
Yet in a CAFA removal action there is generally greater flexibility afforded to a party seeking removal. Specifically, 28 U.S.C. § 1453 provides that the 1-year limitation for removal under § 1446(c)(1) does not apply to removal under CAFA. In a situation where the "case stated by the initial pleading is not removable, a notice of removal may be filed within 30 days after receipt by the defendant" of an "amended pleading, motion, or order or other paper from which it may be first ascertained that the case is one which is or has become removable." 28 U.S.C. § 1446(b)(3). Thus, a defendant may be able to remove an action under CAFA well into the course of the litigation once facts are discovered supporting removal. See Georgene M. Vairo, Moore's Federal Practice: The Complete CAFA: Analysis and Developments Under the Class Action Fairness Act of 2005, p. 167 (Matthew
Travelers concedes it has not completed a thorough review of evidence or requested jurisdictional discovery from the District Court. Because of this, we will affirm in part, vacate in part, and remand to the District Court. We will also direct the District Court to remand the case to state court unless it determines that further jurisdictional proceedings are necessary, or concludes that Travelers has established jurisdiction under CAFA. We note that the District Court "has considerable latitude in devising the procedures it will follow to ferret out the facts pertinent to jurisdiction." Liberty Mut. Ins. Co. v. Ward Trucking Corp., 48 F.3d 742, 756 (3d Cir.1995) (quoting Prakash v. American Univ., 727 F.2d 1174, 1179-80 (D.C.Cir. 1984)). In the event Travelers is unsuccessful in establishing CAFA jurisdiction during the early stages of this action, Travelers may still re-remove the case to federal court if new facts are discovered that establish jurisdiction. See 28 U.S.C. § 1446(b)(3); A.S. ex rel. Miller v. SmithKline Beecham Corp., 769 F.3d 204, 210-11 (3d Cir.2014).
The District Court erred in concluding that the CAFA numerosity requirement was not satisfied, but correctly concluded that Travelers did not establish the CAFA amount-in-controversy requirement. Accordingly, we will affirm in part, vacate in part, and remand to the District Court. The District Court is to remand this case to state court unless the District Court, through further proceedings, determines that Travelers has established jurisdiction under CAFA.
In 2013, the Supreme Court in Standard Fire Insurance Co. v. Knowles held that a stipulation by a named plaintiff in a putative class action, prior to certification of the class, that she and the class she seeks to represent will not seek damages that exceed $5,000,000, does not prevent removal of the case under CAFA. 133 S.Ct. at 1348-1350. In Knowles, the Supreme Court reversed the lower court's conclusion that the proposed class representative's stipulation was binding on the class yet to be certified, thereby foreclosing federal jurisdiction under CAFA, id. at 1348, and held that the District Court "should have ignored that stipulation" and "do[ne] what [a judge] must do in cases without a stipulation and what the statute requires, namely `aggregat[e]' the `claims of the individual class members,'" id. at 1350.
To this extent, Knowles is consistent with our instructions in Morgan that "[t]he party wishing to establish subject matter jurisdiction has the burden to prove to a legal certainty that the amount in controversy exceeds the statutory threshold;" and "[e]ven if a plaintiff states that her claims fall below the threshold, this Court must look to see if the plaintiff's actual monetary demands in the aggregate exceed the threshold, irrespective of whether the plaintiff states that the demands do not." Morgan, 471 F.3d at 474-75. What Knowles teaches on this point is that although a plaintiff may limit her monetary claims, any such limitation is not binding on the class as a whole prior to class-action certification and does not relieve the district court of its obligation to conduct its own analysis of the amount in controversy. 133 S.Ct. at 1349.
We are not presented with a CAFA removal subject to the Morgan test and therefore do not opine on the implications of Knowles for Morgan's holding that "defendants bear the burden to prove to a legal certainty that the complaint exceeds the statutory amount in controversy requirement" where the amount in controversy is alleged to be below the $5,000,000 threshold. Morgan, 471 F.3d at 475. However, consistent with both Knowles and Morgan, we emphasize for the sake of clarity that our instruction that a "Court must look to see if the plaintiff's actual monetary damages in the aggregate exceed the threshold," id. at 474-75, remains important in the wake of Knowles.